Vikram Pandit Boldly Refuses To Kowtow To Peer Pressure

Yesterday Jamie Dimon and Ken Lewis spent millions buying up shares of their banks on the open market. Shares in financial stocks rallied on the news, with investors apparently taking some comfort in the fact that the CEO’s of JP Morgan Chase and Bank of America actually believe that their institutions will survive.

Of course, all eyes are now on Citi chief Vikram Pandit. Will he also show his confidence in the bank he runs by buying shares? So far, Pandit has brazenly refused to give into this kind of pressure. Maybe he thinks that these kind of share purchases are just senseless public relations moves that indicate very little about the health of a financial institution.

Or perhaps he remembers his mother telling him, “If everyone else jumped off a bridge, would you do that too?” Pandit jumped off the bridge months ago, spending nearly $8.4 million to buy common and preferred shares of Citi. That was back in November, when the common shares were trading around $9.25. Now Citi is trading somewhere close to a third of that price, meaning Old Vik just lost around $5 million dollars. He probably thinks that’s enough pain to endure for the sake of public relations.

There is a third possibility: perhaps Pandit knows something we don’t. This morning we speculated that Dimon and Lewis could have been prompted to buy shares on the suspicion (or knowledge) that the government is about to create a bad bank that will recapitalize their institutions without hurting shareholders. Could Pandit know something too?

Let’s recklessly speculate here. What could Pandit know that would discourage him from buying shares? Certainly, it’s not the bad bank idea. Even in the worst case scenario, the bad bank is bullish for bank stocks. It’s got to be something bearish. One possible candidate: nationalization. For weeks people have been wondering if Citi is too broken to carry on without full nationalization by the government. If there have been talks with government officials over this, Pandit would probably want to avoid buying more shares of Citi.

Is it irresponsible of us to speculate like this? Of course not. Pandit can prove us wrong any time he wants by simply buying some shares in his bank. In the meantime, ordinary people who don’t run banks or government bureaucracies are forced to speculate since we’ve been kept in the dark about every single part of the crisis and rescue from the very beginning. And, at almost every step along the way, the news has been far worse than we were led to believe.